Company Car Tax Changes

Despite the financial benefits, of having a company car, continuing to fall they are still viewed by many employees as the must have 'perk' of the job. The Benefit-in-Kind (BIK) value of a company car is determined by HMRC. This is a percentage of the car’s list price based on its CO2 emissions. This is known as its P11d value and includes VAT, delivery and any added extras costing more than £100 and is taxed at your usual income tax rate.

In April 2016, almost all cars will move up two tax bands and again in 2017 by a further two bands.

Diesel cars have been subject to a 3% Benefit in Kind (BIK) surcharge which was set to be abolished from April 2016. However, in his 2015 Autumn Statement, the Chancellor announced that he was delaying this for a further 5 years until 2021. The 3% ‘penalty’ for diesel cars was introduced because they tend to release more harmful gases into the environment and it is thought the 2015 Volkswagen emissions scandal, which revealed pollution levels had been deliberately disguised had some influence over the Chancellor’s decision.

Naturally any company car drivers who have recently changed their vehicle and opted for a diesel as a result of the expected changes to bring them in line with petrol engines will be unhappy with this change which is expected to generate more than £1bn in additional revenue for the Government over the next 5 years.

As we have all been encouraged to drive more environmentally friendly cars the BIK rates for ‘greener’ cars have traditionally been much lower. However, this is changing. Whilst the ‘greener’ cars will continue to attract a lower tax charge the charges are set to rise significantly over the next few years meaning company car drivers of low emission cars will experience a much steeper increase in the amount of tax they pay.